Equity cross-listings in the U.S. and the price of debt
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Using a large panel from 46 countries over 20 years, we find that non-U.S. firms issue corporate bonds more frequently and at lower offering yields following an equity cross-listing on a U.S. exchange. Firms issue more bonds through public offerings instead of private placements and in foreign markets rather than at home, in both cases at significantly lower yields. Moreover, the debt-related benefits are concentrated among firms domiciled in countries with less private benefits of control, efficient debt enforcement, and developed bond markets, suggesting that equity cross-listings cannot completely offset the impact of weak home country institutions. The results support the notion that the monitoring, transparency, and visibility benefits brought about by equity cross-listings on U.S. exchanges are valuable to bond investors.
KeywordsCorporate governance Bonding hypothesis Debt financing Disclosure Law and finance International accounting
JEL classificationsF34 G12 G15 G38 K22
We thank an anonymous referee, Anne Beatty, Phil Berger, Maria Correia, Günther Gebhardt, Wayne Guay, Bob Holthausen, Scott Liao, Russ Lundholm (editor), Oguzhan Ozbas, Doug Skinner, René Stulz, and workshop participants at the 2009 Global Issues in Accounting Conference, 2009 INTACCT international workshop in Porto, 2009 Verein für Socialpolitik Accounting Section meeting, 2009 Conference on Empirical Legal Studies, 2010 European Financial Management Association meeting, 2011 European Accounting Association meeting, University of Chicago, Erasmus University, Goethe University, INSEAD, New York University, Ohio State University, University of Pennsylvania, University of Rochester, Stanford University, and University of Texas at Austin for helpful comments. Ryan Ball gratefully acknowledges the financial support of the Ernst & Young Faculty Fellowship. Florin Vasvari gratefully acknowledges the financial support of the London Business School RAMD Fund.
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